The NatWest West Midlands Growth Tracker showed a softer improvement in operating conditions locally, with a slower and only fractional increase in new business restricting output growth.
Business confidence remained historically high, but job shedding intensified and price pressures gathered pace.
At 51.6 in June, the Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of the region’s manufacturing and service sectors – highlighted growth for the ninth consecutive month.
However, falling from 54.2 in May to its lowest in 2024 so far, the headline figure pointed to a softer and only modest rate of expansion. Panellists noted that delayed project starts, the loss of existing customers and slow business decisions dampened demand and subsequently output volumes.
Although new orders placed with private sector companies in the West Midlands continued to increase, the pace of expansion softened to the weakest in three months and was fractional overall. Anecdotal evidence indicated that growth was constrained by political uncertainty and subdued demand conditions.
June data showed another decline in private sector jobs. According to monitored companies, shortages of new work and the loss of contracts put pressure on headcounts, with voluntary leavers not being replaced. There were also mentions of cost considerations and staff leaving in search of higher pay elsewhere.
Companies indicated a further increase in their operating expenses, which they associated with higher food, insurance, labour, material and shipping costs. The overall rate of inflation was sharp and quickened since May. In line with an intensification of cost pressures, there was a quicker increase in selling prices.
Dipesh Mistry, chair of the NatWest Midlands and East of England Regional Board, said: “The latest Growth Tracker data for the West Midlands again showed rising levels of new business and output at local firms.
"Growth trailed behind the national average, however, as demand was reportedly constrained by public policy uncertainty. Still, expectations that interest rates will start to come down and that market conditions will improve after the General Election continued to support business confidence.
"Inflationary pressures remained high, however, a key reason behind another round of job shedding as firms opted to not replace departing staff.”
Performance in relation to UK
Six out of the 12 monitored UK regions and nations posted an increase in sales, with the West Midlands noting the softest rise. The local trend for employment was among the worst, with the pace of reduction equal to the East Midlands and fractionally slower than in the South West.
Cost pressures in the West Midlands were among the weakest of the 12 monitored areas of the UK, while the region came fourth in the rankings for charge inflation.
Amid reports of shortages of new orders and efficiency gains, West Midlands companies were able to make further inroads into their backlogs in June. Work pending completion decreased for the nineteenth successive month, and at a solid pace that was the most pronounced since March. The reduction was broadly in line with the national average.
The Future Output Index slipped to an eight-month low in June, but remained above both the neutral mark of 50.0 and its long-run average. Hence, the latest figure was indicative of a strong degree of optimism among West Midlands firms regarding the year-ahead outlook for business activity.
Product diversification, expectations of lower interest rates, differentiated marketing and high numbers of client enquiries underpinned positive sentiment. Only companies in the South East were more upbeat than local firms.
